MNI Global Morning Briefing

The week ends with several data releases of note, including German industrial production at 0700GMT and Italian retail sales at 0900GMT. The highlight in the US is the release of the keynote nonfarm payrolls at 1330GMT.

German industrial production expected to rise

Industrial output eased slightly in August after three consecutive months of growth. August's report noted that output is still around 11% below the pre-crisis level. In September markets are looking for an increase of monthly industrial production by 2.6%. Annual output decreased 9.6% in August and markets expect the indicator to improve to -6.5% in September.

Recently released indicators support market forecasts. Factory orders showed the fifth consecutive increase of orders in September, although the pace of the recovery is slowing, and orders are still 2.6% below February's level. The truck toll mileage index continued its recovery as well in September, rising to 0.8% m/m and 1.3% y/y. The strong connection of the truck toll mileage index and IP makes the index an early indicator of the development in the production sector. The Ifo business climate indicator increased in September but showed the first decline in five months in October. However, the report showed that the industrial sector saw another improvement in October in contrast to the services and retail trade sector. According to survey evidence the manufacturing sector is faring significantly better than the service sector as it is less affected by social distancing measures. Moreover, factories are allowed to remain open during the second lockdown, hence output is likely to continue its slow recovery and a steep drop such as in March and April can be prevented.

Italian retail sales seen falling

Italian retail sales rose sharply in August by 8.2%, shifting sales close to pre-crisis levels. Annual sales improved as well and rose by 0.8% which was the first year-on-year increase since February. However, in September markets are expecting a decline of monthly sales by 1.5% amid the resurgence of Covid-19 cases. Nevertheless, yearly sales are projected to improve further to 1.2%. Consumer confidence eased in October with both economic and future indices deteriorating. The stricter restrictions recently imposed by the government are likely to weigh heavily on spending again going forward.

US nonfarm payrolls expected to increase

Employment continued to grow through October, though the labor market recovery is still slowing after unprecedented improvement in the spring and summertime. Nonfarm payrolls should grow by 600,000 in figures due Friday, according to Bloomberg.

Weekly unemployment claims levels have softened in recent weeks, suggesting that employers increased staff through the month. But analysts note that claims being made under special provisions of the CARES Act are still surging, and roughly 23 million unemployed Americans are still receiving government support.

Hiring is thought to have slowed in mid-to-late October as Covid-19 case counts and hospitalization rates across the country skyrocketed and the many businesses were constrained by social distancing guidelines. Private payrolls are set to grow 680,000 in October, according to Bloomberg. The unemployment rate in October likely fell to 7.7% from 7.9% in September.

The main events to look out for on Friday include speeches by BOE's Ben Broadbent and Dave Ramsden and BOC's Tiff Macklem.